RE: Sanderstead capital partners13 Feb 2024 11:07
These projects will be worth decent money but the hope is CLX will be big this year. The rest have the potential to add decent value which is why we can attract large investors. The lab revenue and balance sheet helps with that plus obviously 201 will be a deal maker for us.
Oncology is by far the most important area for dealmaking in the biopharma industry. The value of cancer deals for which financial details were disclosed reached $73.1 billion in 2021 and $93.1 billion in 20221. Here, we analyze the economics of disclosed partnering, licensing and acquisition deals in the oncology field from 2015 through 2022 (Box 1). The analysis provides pointers about the requirements to pursue a deal, the right timing, how to maximize deal value and how to adapt to the current challenging market.
Deal economics
Early dealmaking appears to be the norm in oncology nowadays, as 73% of non-acquisition deals from 2015 to 2022 involved preclinical ventures (Fig. 1).
Mean deal values by deal type and proportions of oncology deals by stage of development
Fig. 1 | Trends in oncology deals: 2015–2022. Mean deal values by deal type and proportions of oncology deals by stage of development. See Box 1 for details of the dataset and analysis.
Focusing on preclinical deals, for which sufficent data are available for analysis, the mean potential deal value of a preclinical acquisition ($359 million) was much lower than that for a preclinical licensing deal ($540 million) or partnering deal ($985 million) (Fig. 2). However, partnering or licensing deals were considerably more backloaded than acquisitions, as mean upfront payments for acquisitions ($130 million) were 2.5–4.2-fold higher. Biotechs and their backing investors likely prefer deals with upfront payments that provide good initial return on investments, rather than going for bigger deals that are mostly based on contingent milestone payments.
Indeed, based on our previously reported estimate for the invested capital in preclinical oncology ventures, an upfront payment of $130 million would return more than four times the typical invested capital2. Early exits are also preferred by most investors as their funds often have closed-end terms that are difficult to reconcile with long earn-out structures. Furthermore, early exits provide an early validation of a fund’s performance, greatly facilitating the raise of a next fund.
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